Gary Bode, CPA: any IRS Notice is disconcerting. If you'd like a free initial consultant with a Wilmington NC tax accountant, please call 399-2705.
IRS tax audits, is there a good kind? Well, maybe. The IRS has several levels of tax audits. The lowest intensity is the Correspondence Audit. Conducted through the mail, it is usually aimed at individual taxpayers for very specific and limited issues. The IRS mails a Notice, usually stating a tax return has been changed. It explains why and kindly calculates an additional amount you owe. While there could be a specific IRS agent involved, usually this is all computer generated. Calling them may help, but often just adds confusion to the main issues.
“Any IRS correspondence shouldn’t be ignored. Their computer technology is superb and they don’t forget or relent. And your rights as a taxpayer have time limits.”
Gary Bode, CPA
Wilmington NC tax accountant
Should you pay? It depends. If you mistakenly listed your Interest Income as $972 instead of $1,972, they’ve got you. But you shouldn’t immediately be intimidated into paying without due diligence either. Let’s say you acquired a rental property and didn’t report this on your tax preparation. Oops! And your tenant reported the rent to the IRS via a Form 1099-MISC, drawing their attention to you. On the Notice, they’ll calculate your additional tax on the entire rent income. But, you’ve got the right to deduct associated expenses from the rental income. So, in this case, you will want to amend your prior tax return.
Sometimes, the IRS audit Notice just requests additional documentation to support a deduction on your Form 1040. Like, say, proof of your real estate taxes paid on Schedule A (for itemized deductions), or a copy of your business mileage log for Schedule C. Unfortunately, the taxpayer has the burden of proof in theses cases. Thus all the caveats about keeping at least three years of documentation on file. Why was your return selected for a Correspondence tax audit? Sometimes tax returns are randomly selected. But more likely, it was compared to your own prior returns, or other taxpayer’s returns with similar circumstances.
Should you get your CPA involved with a Correspondence tax audit? When new clients call us, they’ve usually done their own prior tax preparation and the IRS has found fault with it. Or they have several years of unfiled returns.
While folks talk about being called by the IRS, our experience is that they don’t do this initially. And the IRS specifically states it does not use email.
We’re a CPA firm in Wilmington NC but serve a wider geographical base. If you need a free initial consult with a CPA tax accountant, please call us at (910) 399-2705. We offer IRS tax audit representation and handle back tax cases.
